Deutsche Bank's Equity Prime Services Group revealed today the results of Part One of its "2003 Institutional Survey on Alternative Investment Trends".
Deutsche Bank believes the survey represents at least half the total assets presently invested in hedge funds and is one of the largest surveys ever conducted on the hedge fund marketplace.
This year's survey covers 376 alternative asset investors representing over US$350 billion of assets invested in hedge funds. Investors surveyed were drawn from Asia, Europe and North America, and include: wealthy private individuals, funds of funds, large family offices, endowments, foundations, banks, insurance companies, corporate and state pension plans.
The survey results provide statistical insight into the characteristics of alternative asset investors, the way they currently invest, expectations regarding their future investments and their performance predictions for the first half of 2003.
John Dyment, Deutsche Bank's Global Head of Capital Introduction Services, said: "This survey provides a particularly comprehensive analysis of alternative investor characteristics and behavior as it draws upon the extensive relationships that Deutsche Bank maintains with these investors worldwide".
Mr Dyment said: "The results affirm that existing alternative asset investors are continuing to redirect their portfolio allocations into hedge fund products. Responses do, however, indicate a desire to geographically diversify alternative asset holdings by decreasing exposure to US-based funds in favor of those in Europe and Asia."
Highlights of the survey results include the following:
- Respondents continue to redirect their portfolio allocations from long only equity products and private equity to hedge fund products. 62 per cent of those surveyed plan to increase their portfolio allocations to alternative assets in 2003.
- Investors plan to reduce their exposure to US based funds and increase their exposure to European and Asian Funds. In the first six months of 2003, direct hedge fund investors indicate that they intend to decrease their portfolio allocation to US based funds by over 4 per cent, while increasing their Asia and European fund allocations by approximately 1 per cent and 2 per cent, respectively.
- Respondents expect that Long/Short, Macro, CTA and Distressed Debt managers will have the best performances in the first half of 2003, with 51 per cent of investors indicating that macro would be among the best performers.
- Over 50 per cent of investors plan to increase allocations to Long/Short managers in 2003. Portfolio allocations to Multi-Strategy, Macro, Distressed Debt and CTA funds are also expected to increase in 2003.
- Investors hold their hedge fund investments longer than commonly perceived. Over 60 per cent of investors report holding periods of three or more years.
- Funds of funds make over three times the number of allocations per year than pensions, endowments or foundations, a trend that is unchanged from last year.
- Fees, transparency and risk are the main concerns investors have when considering allocations into funds of funds. In 2003, 60 per cent of fund of fund investors view fees as a hurdle to investment, up from 51 per cent in 2002. Transparency and risk are concerns to 57 per cent and 37 per cent of investors, down from 66 per cent and 51 per cent in 2002, respectively.
- Endowments, pensions and foundations seek advice from consultants more often than other types of investors. For example, approximately 55 per cent of endowments surveyed utilise a consultant before making an alternative asset investment, while less than 15 per cent of family offices seek the advice of a consultant
Approximately half of those surveyed are defined as a fund of funds and two-thirds of surveyed investors have been investing in alternative assets for more than five years.
Investor responses indicate that the vast majority of their portfolio is invested in alternative assets, with 60 per cent of respondents allocating over 70 per cent of portfolio assets to hedge funds.
The majority of respondents also indicate that they intend to increase the percent composition of alternative assets in their portfolio in 2003.
Part two of this survey will be published in March 2003 and will focus on aspects of investor behavior such as risk management, fees, capacity and investment requirements.